Here are the unstoppable growth stocks that could join Apple, NVIDIA, and Microsoft in the $3 trillion club by 2028.

Giants of industry and energy general electric and exxon mobil It was the most valuable company in the world when measured by market capitalization, with values ​​of $319 billion and $283 billion, respectively. Now, just 20 years later, interest in technology is leading the field.

At the top of the list are some of the world’s most well-known technology names. apple is topping the charts with $3.5 trillion (as of this writing). Nvidia and microsoft They trail closely behind with market capitalizations of $3.2 trillion and $3.1 trillion, respectively.

With a market capitalization of just $2 trillion, it may seem a bit premature to think: alphabet (Google -1.35%) (GOOG -1.34%) You have what it takes to become a member of the $3 trillion club. But the stock is up 88% since the beginning of last year and 172% over the past five years, and there’s good reason to believe it will continue to rise.

A combination of an improving economy, Alphabet’s market power and gains in artificial intelligence (AI) could give the company the boost it needs to join this exclusive society.

Image source: Getty Images.

Improved performance

The broader challenges of the past few years, marked by macroeconomic headwinds and the worst inflation rates since the early 1980s, are evident. The situation has weighed heavily on Alphabet’s major business units, causing stock prices to fall by as much as 44%.

However, there has been significant improvement in recent months. In September, the Federal Reserve cut interest rates for the first time since March 2020, and consumer confidence rose to its highest level in months.

The economic recovery has had a dramatic impact on Alphabet’s results. Second quarter sales were $84.7 billion, an increase of 14% year over year, and diluted earnings per share (EPS) were $1.89, an increase of 31%.

Each of the company’s major business segments played their part in driving results. The recovery in advertising, which has been hit hardest in recent years, has had the most serious impact. Google’s advertising, which makes up the bulk of Alphabet’s revenue, grew 11% year over year, and Google Cloud, the company’s fastest-growing division, grew 29%.

An industry leader in many ways

Google has long been the undisputed leader in search, recently controlling 90% of the search market, according to Internet statistics aggregator StatCounter. The company has consistently worked to improve its search insights and underlying algorithms, and in the process has become something of an expert on the subject of AI.

It is also the undisputed leader in digital advertising, powered primarily by Google Search and YouTube, as well as a suite of products that each count in the billions of users. Google captured an estimated 39% of global digital ad revenue in 2023, according to data compiled by Statista. For context, our closest competitors — meta platform — got just 18%. This advantage is expected to continue.

Alphabet is also a strong competitor in the cloud computing space. Google Cloud is one of the “big three” as the third largest provider of cloud infrastructure services. According to data provided by Canalys, the company controlled about 10% of the market in the second quarter. It was also the fastest growing with a 30% year-over-year revenue increase.

Helping drive demand for Google Cloud is the company’s generative AI services. Alphabet has been using AI to inform search results for years. The company has refocused its expertise to power its suite of AI-powered models led by Gemini, one of the world’s leading foundational AI models. This is attracting new users to Google Cloud.

Uncertainty weighs on stock prices

I would be remiss if I didn’t address the elephant in the room. The antitrust case against Alphabet is one step closer to completion. The court found that Google violated antitrust laws, and the U.S. Department of Justice is considering recommendations on appropriate remedies, but the judge will have the final say. One possible outcome is a breakup of the company, something that hasn’t happened in decades. Other less stringent proposals include sharing Google’s search code with rivals and preventing other providers from paying Google to be their default search engine.

A final ruling is not expected for at least a year, and if Alphabet appeals, which it says it will, the case could drag on for several more years. This has been an overhang for Alphabet stocks in recent months, as Wall Street hates uncertainty.

That aside, even if Alphabet were to break up (which I don’t think it will), it could unlock more value and enrich shareholders in the process. So I think the current concerns are just noise.

The road to $3 trillion

Alphabet currently has a market capitalization of about $2 trillion, and its stock would need to rise about 47% to reach $3 trillion. According to Wall Street, Alphabet is expected to generate $347.4 billion in revenue in 2024, with a forward price-to-sales (P/S) ratio of approximately 6x. Assuming the P/S remains constant, Alphabet will need to grow its earnings. Revenues reach approximately $510 billion annually to support a $3 trillion market capitalization.

Wall Street currently expects Alphabet’s revenue to grow about 11% annually over the next five years. If a company achieves that benchmark, It was done The market capitalization will reach $3 trillion as early as 2028. It’s worth noting that Alphabet has increased its annual revenue by 368% over the past decade, so Wall Street may be underestimating that forecast.

Additionally, Alphabet is currently selling for about 24 times earnings, which is a significant discount compared to its price-to-earnings ratio of 30 times. S&P500. The aforementioned uncertainty makes it a very attractive entry point for smart investors who plan to buy and hold for the long term.